Colorado gaming officials said Thursday they will commence work on regulations allowing sports betting exchanges to operate within the Centennial State. That commitment came during the last 2023 meeting of the state’s Limited Gaming Control Commission.
It also comes more than a week after Jacob Fortinsky, CEO of Novig Laboratories, wrote to regulators and revised the company’s request to offer a Colorado sports betting exchange. That letter prompted a discussion of more than 20 minutes on exchanges, allowing bettors to wager amongst themselves rather than a sportsbook. Exchanges charge fees typically less than the margins sportsbooks take on wagers.
Chris Schroeder, the director of the Colorado Division of Gaming, did not commit to a concrete date for when the work would begin but promised it would not be pushed aside.
“I believe that we’re going to shoot for February for a timeframe of getting that stakeholder engagement or at least continuing that stakeholder engagement,” he said. “I expect the division to provide an update to the Commission in January about our expected timelines.”
CEOs: Exchanges Can Expand Betting Market
In the letter, Fortinsky said allowing sports betting exchanges would diversify and expand the Colorado betting apps market. He said other exchanges also attract “institutional capital,” which would greatly increase handle and tax revenue.
“The social aspect of our exchange, where users can trade against each other, further contributes to this appeal, attracting a broader user base motivated by both financial and social engagement, thereby enhancing trade volume,” Fortinsky wrote.
Novig, which is licensed through the soon-to-open Chamonix Casino Hotel in Cripple Creek, is one of two licensees that would like to offer an exchange in Colorado. Sporttrade began operations there in late August.
While the Philadelphia-based company operates an exchange in New Jersey (where Prophet Exchange operates one, too), Sporttrade works differently in Colorado, where it is partnered with Easy Street Casino. Bettors there are not able to place limit orders. Instead, Colorado Sporttrade users can only accept bets at the current price.
“It is our position that allowing players to use limit orders improves the ecosystem for everyone else,” Sporttrade Founder and CEO Alex Kane told BetColorado in August.
Legislative Fix Not an Immediate Option
Colorado’s sports betting law allows for exchange wagering. Still, there has been some concern about how exchanges should be taxed since they operate differently from online and brick-and-mortar sportsbooks.
There was some question Thursday regarding whether regulators should go back to the legislature for more guidance. However, taking it to lawmakers would have likely pushed any advancement on exchange wagering until 2025.
Commissioner Shawn Coleman pointed out that Colorado state lawmakers can only file up to five bills apiece. Those requests have already been accounted for in the upcoming session, which starts Jan. 10.
“I think that we need to be focusing our work to do our job, which is to create the rule based on the law that they said and not be so interested in changing it before it can be changed,” Coleman said. “If we find out this becomes unworkable, well, I think the legislature will be happy to change that law. But we can’t let any discomfort with what the statute says be a stumbling block.”
Commissioner John Tipton concurred. Tipton previously served as the executive director of the Colorado Department of Revenue, which oversees the Division of Gaming. He said any attempt to take this to the General Assembly now would only be sent back to the division.
Tipton also pushed for a timeframe, adding that operators wishing to establish exchanges “are anxious” to start in Colorado. Chairman Kevin Armstrong agreed the work should begin, but that state officials still need to work on rules that best serve the state.
Novig ‘Excited’ About Upcoming Launch
In a statement after Thursday's commission meeting, Fortisky said Novig was “thrilled” with the steps announced by commissioners and the division leader. The CEO said once Colorado establishes its rules, it will help Novig expand because it will create a “precedent” for other states.
“It’s clear that there’s a strong consumer demand for betting exchanges, and we strongly believe the exchange model will ultimately take over the broken sportsbook model that currently dominates the industry,” Fortinsky told BetColorado.com. “We’re excited to be launching our app in Colorado within the next few days, which we believe will have the industry’s best odds and user experience, and we’re excited to hopefully roll out our full exchange in the coming months.”
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